I'm relatively new to this game, and was hoping one of the sagacious traders here could confirm/deny a hypothetical for me... Assuming I buy $5000 of shares in company A, and $5000 shares in company B. Assume brokerage to be $20 for simplicity. Option 1 Company A does well, and 3 months later the shares are worth $6000. Company B has fallen and it's shares are now worth $4500. I sell shares in Company A, $1000 profit is realised. As shares were held for less than a year, the full amount is assessable as a capital gain. Let's pretend my tax rate is 50%, meaning $500 would be due. I sell the shares in Company B too, resulting in a capital loss of $500, reducing the overall capital gain to $500, meaning $250 would be due, minus the $80 brokerage for purchase/sale of the shares. I immediately re-buy the shares in company B for the same price. Net result = shareholding in Company B retained, $170 tax liability. Option 2 18 months later shares in Company A are valued at $6000, and I sell for $1000 profit. Applying the 50% discount for holding more than 12 months, $500 is assessable as a capital gain, meaning at a tax rate of 50%, $250 is due, minus the $40 brokerage. I keep my shares in company B, which has rebounded to be worth as much as it was on initial purchase. Net result = shareholding in Company B retained, $210 tax liability. Is this correct? If so, is this a valid CGT minimisation strategy to overcome the 12 month rule?
Just found this - http://www.news.com.au/finance/mone...es/story-e6frfmdr-1111115524396#ixzz1qmXU0n4f And this - http://law.ato.gov.au/atolaw/view.htm?DocID=TPA/TA20087/NAT/ATO/00001 Guess that means Option 1 could be perceived as a "wash sale" unless I reinvest the cash from sale of Company B into Company C instead or wait long enough before reinvesting in company B. Still, interested to hear opinions/experiences with this. I'm not a fan of the 12 month rule, being punished for not locking away my fiat for an arbitrary time period. I welcome any alternative strategies to overcome this punitive limitation.
